OVERCAPACITY DRIVES DOWN OOIL’s FIRST-HALF EARNINGS

OVERCAPACITY DRIVES DOWN OOILÆS FIRST-HALF EARNINGS    Orient Overseas (International) Ltd. reported net income for the first half of 2002 of $1.0 million, down from $49.1 million in the first half of 2001, due almost entirely to weak performance of OOCL, its container shipping line.
   Revenue fell 4.4 percent to $1.14 billion. Pre-tax profit was $4.1 million, compared to $54.7 million in the year-earlier period.
   OOCL's was impacted by a 'steep drop in the general level of freight rates,' due to overcapacity in the trades, said C.C. Tung, OOIL's chairman and chief executive officer.
   The world's economic slowdown 'coincided with the almost unprecedented increase in the rate of delivery of newbuilding container vessels,' Tung said. Though container volumes have grown higher than first forecast, average rates per TEU have fallen significantly.
   On the transpacific routes to the U.S. West Coast, lifting are up 17.1 percent in the first half of 2002, but average revenues per TEU have fallen 15.8 percent.
   'Our organic growth plans have been met on all of our trade routes except by the Asia-to-Europe trades on which we experienced a 3.7-percent fall in total liftings for the first six months of 2002,' Tung said.
   Overcapacity and the continued delivery of new tonnage 'remains a problem for the industry,' Tung said. 'It will require strong economic growth both in the U.S. and Europe, and a consequent strong growth in container volumes, to carry us through until this current surge in the deployment of new tonnage begins to abate.'
   However, Tung said OOIL has seen few signs that rates will recover in the short-term enough to allow a return to profitability levels of the past few years.
   During the first half, OOCL took delivery under long-term charter of a new 5,700-TEU vessel. The group is expecting the delivery of six vessels of about 7,700 TEUs each and one ice-strengthened 4,100-TEU vessel.
   OOIL said its terminal operations have seen mixed results thus far in 2002. While the Deltaport and Vanterm terminals in Vancouver have seen increased throughput, 'the competitive situation and current overcapacity in the Port of New York and New Jersey has led to below budget performances by our Howland Hook Terminal on Staten Island and Global Terminal in New Jersey,' Tung said.